Correlation Between Microsoft and KEYCORP Dusseldorf
Can any of the company-specific risk be diversified away by investing in both Microsoft and KEYCORP Dusseldorf at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and KEYCORP Dusseldorf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and KEYCORP Dusseldorf, you can compare the effects of market volatilities on Microsoft and KEYCORP Dusseldorf and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of KEYCORP Dusseldorf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and KEYCORP Dusseldorf.
Diversification Opportunities for Microsoft and KEYCORP Dusseldorf
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and KEYCORP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KEYCORP Dusseldorf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP Dusseldorf and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with KEYCORP Dusseldorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYCORP Dusseldorf has no effect on the direction of Microsoft i.e., Microsoft and KEYCORP Dusseldorf go up and down completely randomly.
Pair Corralation between Microsoft and KEYCORP Dusseldorf
Assuming the 90 days trading horizon Microsoft is expected to generate 26.63 times less return on investment than KEYCORP Dusseldorf. But when comparing it to its historical volatility, Microsoft is 1.86 times less risky than KEYCORP Dusseldorf. It trades about 0.02 of its potential returns per unit of risk. KEYCORP Dusseldorf is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,575 in KEYCORP Dusseldorf on August 24, 2024 and sell it today you would earn a total of 293.00 from holding KEYCORP Dusseldorf or generate 18.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. KEYCORP Dusseldorf
Performance |
| Timeline |
| Microsoft |
| KEYCORP Dusseldorf |
Microsoft and KEYCORP Dusseldorf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and KEYCORP Dusseldorf
The main advantage of trading using opposite Microsoft and KEYCORP Dusseldorf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, KEYCORP Dusseldorf can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KEYCORP Dusseldorf will offset losses from the drop in KEYCORP Dusseldorf's long position.| Microsoft vs. DiamondRock Hospitality | Microsoft vs. Cardinal Health | Microsoft vs. GUARDANT HEALTH CL | Microsoft vs. NORDHEALTH AS NK |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
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